China opens up VPN joint venture to foreign investors
China opens up VPN joint venture to foreign investors
Author: CSEBA / SEEbiz
13th September 2020
BEIJING - China's cabinet approved a plan enabling foreign telecom firms to set up joint ventures in Beijing's trial zone in virtual private network (VPN) services, with an ownership cap at 50 percent, taking a concrete step in relaxing cross-border digital flow.

A Chinese telecom expert said the movement underlines China's commitment to further open its services sector and it is in stark contrast with the US, which is purging its telecom sector of foreign players.

The State Council, China's cabinet, agreed on principle Monday on a guideline on deepening and expanding trials on the opening of services sector in Beijing, allowing foreign investor to invest in VPN services as part of the Beijing trial in latest opening up move to further relax the services sector, further facilitate trade and investment, and the safe cross-border flow of data.

According to the guideline, which opens up the internet services sectors along with other sectors including mobile app services and financial services, foreign telecom operators could set up joint ventures to provide VPN services to foreign-invested companies in Beijing. The plan aims to make Beijing's services as open as the world's leading countries by 2030.

Fu Liang, a Beijing-based telecom industry expert, told the Global Times on Monday that the move would greatly reduce the operational and communication costs of foreign companies which will welcome the move.

"Customers of foreign telecom operators such as BT can tap the new service and the one-stop service will be more appealing than the current way of business as it requires less attention and ensures the continuity for data flow between China and other countries - where company operations are based," Fu said. "There is no need of involving a further telecom services provider."

As a sector deemed vital for national economy, it will still maintain a cap on foreign ownership.

The Beijing municipal government first announced the move in August 2019 with plans to enable the new policy by the end of last year.

The State Council document on Monday attests to China's commitment to open up this sector and is in stark contrast with the US, which is trying to drive Chinese telecom operators out of its market, analysts said.

Under the so-called "Clean Network" scheme from the US State Department, the US is expelling Chinese telecom operators including China Telecom Corp and China Unicom.

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